Risk usually outweighs reward with payday loans

CONSUMER FORUM

Posted March 28, 2016, at 9:07 a.m.

Just two weeks ago in this column we wrote about some debt collectors who bend rules or break laws. Last week, the Federal Trade Commission warned that some collectors are trying to capitalize on bogus payday loans.

A payday loan is a cash advance given to a consumer. The consumer hands over a check or agrees to have a deposit account debited. Either transaction takes place at a future date when, the theory goes, the consumer can repay the loan plus interest.

Those short-term loans tend to carry high interest rates. In Maine, a supervised lender license is required, and lenders cannot charge more than $25 on a loan of $250 or more. If a consumer can’t pay back the loan — often due in two weeks — it might be renewed, incurring another $25 fee. If the loan were renewed every two weeks for a year, the consumer would pay $650 in fees on that $250 loan.

Unscrupulous lenders don’t bother with licenses or with obeying the state and federal Fair Debt Collection Practices Acts. The FTC last week alerted state regulators nationwide that several companies either are trying to collect nonexistent loans or that they’re trying to collect on loans that were never turned over to any third-party collector.

The FTC alert stated that some suspicious portfolios of alleged payday loan debts have surfaced in the debt collection marketplace. Third-party collectors buy portfolios and try to collect, often at pennies on the dollar. Buyers of phony debt are violating the Fair Debt Collection Practices Act, Federal Trade Commission Act or both.

The FTC said it has learned third-party collectors are trying to collect loans allegedly made by USFastCash, 500FastCash, OneClickCash, Ameriloan, United Cash Loans, AdvantageCashServices, and StarCashProcessing.

The servicer of debts owed those firms, AMG Services, has told the FTC that none of the above companies’ loans were placed with or sold to any third parties for collection.

Last week’s alert was directed at people in the debt collection industry.But consumers who get threatening calls about money they supposedly owe to one of the above online lenders — or about any debt — should verify what they’re told.

Consumers have the right to dispute a debt and request verification within 30 days of getting written notice of the debt. Until the collection agency sends proof that you owe the debt, it has to stop trying to collect.

People at Maine’s Bureau of Consumer Credit Protection can answer specific questions. Call them at 1-800-DEBT-LAW (1-800-332-8529) or visit online at Credit.Maine.gov. At the website, you can find the Downeaster Common Sense Guide: Debt Collection or request a copy by calling the Bureau.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

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